Online electronic transaction and funds transfer method and system

ABSTRACT

Existing e-commerce is carried out largely using credit card charges, which are expensive in terms of transaction charges and not particularly secure. The present invention provides an online funds transfer system which avoids transmitting sensitive information over the Internet, and utilizes the security and simplicity of the Automated Clearing House system, and the benefits of pre-approved payment and debit systems. It does this by using the bank Automated Clearing House system through pre-approved debits from the purchaser&#39;s bank account and payment distribution to the vendor&#39;s bank account.

REFERENCE TO RELATED APPLICATIONS

This application is a continuation of pending application Ser. No.14/033,419, filed Sep. 22, 2013, which is a continuation of applicationSer. No. 09/667,621, filed Sep. 22, 2000, now U.S. Pat. No. 8,543,495issued Sep. 24, 2013 which is a continuation-in-part of application Ser.No. 09/592,901 filed Jun. 12, 2000, which is now abandoned.

TECHNICAL FIELD

The invention relates to the field of online transactions and moreparticularly to a system for the transfer of funds on payment for goodsor services using the Internet.

BACKGROUND ART

Currently the majority of Internet-based commercial transactions areconducted using credit card charges. This has a number of drawbacks. Thecharges levied on the vendor by the banks for credit card transactionsare relatively high, typically 3%. Security of the credit card numbersis a problem, and there is therefore a reluctance of consumers to makesuch transactions. Other online funds transfer methods have beendeveloped, such as electronic purses or wallets, but none of these haveachieved wide acceptance due to a number of factors, includingcumbersome procedures, unreasonable costs and unfair assignment of risk.Consumers require a high level of trust in such online transactionsystems.

Consumers are accustomed to authorizing pre-approved payments to bededucted from a chequing account for many regular payments, such asmortgage and loan payments. Such transactions, which utilize the bankingAutomated Clearing-House (ACH) System, are relatively secure andinexpensive. Bank authorization of such payments typically requires onlya voided cheque from the consumer's designated chequing account, and theconsumer's signature, and the bank charge is simply a per transactioncharge. Similarly banks will transfer funds into a bank account withminimum authorization and bank charges. Fraud is rarely a problem inthese transactions given the nature of the parties involved in thetransactions, and consumers have come to trust these procedures.

There is therefore a need for an online funds transfer system whichavoids transmitting sensitive information over the Internet, andutilizes the security and simplicity of the ACH system, and the benefitsof pre-approved payment and debit systems.

DISCLOSURE OF INVENTION

The present invention therefore provides a method of conductingcommercial transactions between a customer and a participating vendorover a global computer network comprising: a) providing a system managerbank account for receiving customer deposits; b) assigning the customera customer identification number; c) maintaining an account representingthe balance of funds held to a customer's credit in the system managerbank account and associating the balance with the customeridentification number; d) transferring funds to the customer's creditinto the system manager bank account; e) providing bank accountinformation in relation to the participating vendor; f) communicating aproposed charge amount and the customer identification to the systemmanager; g) the system manager confirming the availability of funds inassociation with the customer identification and communicating theresults of the confirmation to the vendor; h) if sufficient funds tocover the proposed charge amount are available in the system managerbank account in association with the customer identification,transferring the amount of the proposed charge amount to the vendor bankaccount from the system manager bank account and debiting the account ofthe customer. In a preferred form of the invention, the funds aretransferred to the customer's credit into the system manager bankaccount by obtaining a customer PAD authorization in favour of thesystem manager.

BRIEF DESCRIPTION OF THE DRAWINGS

In drawings which disclose a preferred embodiment of the invention,

FIG. 1 is a schematic diagram illustrating the method of the invention;

FIG. 2 is a schematic illustration of a computer network for carryingout the invention; and

FIG. 3 is a flowchart illustrating the method of the invention.

BEST MODE(S) FOR CARRYING OUT THE INVENTION

With reference to FIG. 1, a customer 10 registers to use the system withan agent 12 for the electronic funds transfer system manager (referredto herein as “my-eBanc”) by agreeing to an “Authorization forPre-Authorized Debits”, whether for personal and/or business purposes,as standardized, for example, by the Canadian Payments Association,whether by signing a standard form or clicking on an electronic button.Such form authorizes my-eBanc to issue Pre-Authorized Debits (“PAD”) tobe drawn on an account. It specifies the customer's financialinstitution 14 (“the Processing Institution”), such as a bank, providesa bank account number, and authorizes the issuance of a PAD by my-eBancup to a given maximum. Such form provides that the ProcessingInstitution is not required to verify that the terms of theAuthorization have been complied with before honouring a PAD issued bymy-eBanc on the designated account. The customer 10 also provides ane-mail address and selects a username and confidential password.My-eBanc then issues a unique, confidential identification number whichit associates with the customer username and password, and which can bestored as an encrypted “cookie” on the customer's computer so that thecustomer need not always enter the password when communicating with themy-eBanc server.

While preferably this customer registration is done through a personalagent 12, it can also be done through the my-eBanc web site 20 or via a1-800 telephone number, for example. If done through a personal orvendor agent 12, the system can be promoted by providing the agent witha commission or royalty based on the volume of sales by the customer.

In order to ensure that the account number (the RTN or Routing Transitaccount Number) in fact corresponds to a bank account owned by theindividual purporting to own the account before the customer is givenaccess to the my-eBanc system, the following method can be used. Uponregistration the customer submits the RTN, the accuracy of which can beconfirmed by requiring the customer to re-enter or confirm it. Theelectronic funds transfer system manager (my-eBanc) then generates arandom confirmation code (RCC) consisting of a string of alpha-numericcharacters, part of which identifies the source of the string and partof which is randomly generated, for example MEB145jpu840vbi, where MEBindicates my eBanc as the source, and the balance of the string israndom. The RCC is stored in database 28 along with the othercustomer-related information. My-eBanc then makes a nominal deposit, say$0.15, to the customer's account corresponding to the RTN using thePayment Distribution System of the ACH, and using the RCC as thereference number. Therefore on the customer's account statement the RCCwill appear in the Transaction description column next to the creditcolumn showing the $0.15 deposit. The customer is then sent an e-mailinstructing the customer to obtain the RCC from his or her bankstatement (which is frequently accessible on-line to the customer) andenter it in the my e-Banc web site. For example the customer isinstructed as follows:

1. Get the 15-character alphanumeric code starting with MEB from yourbank account statement that corresponds to a $0.15 deposit.

2. Go to the following web link www.my-eBanc.com.

3. Enter your user name.

4. Enter your password.

5. Enter the 15-character code.

The code entered by the customer is then compared to the code stored indatabase 28 for the customer and, if identical, the customer is givenaccess to the my-eBanc system. If the codes are different, the customeris asked to re-enter it and the codes are compared again. This processis repeated a limited number of times. If the customer does not achievea match, then the session is terminated and the customer is instructedto commence the process again by re-submitting an RTN number, and theforegoing process is repeated.

To commence using the system, the customer 10 authorizes a PAD in aspecific amount, e.g. $1,000 to be issued to my-eBanc and my-eBanccauses the Processing Institution 14 to transfer such funds from thedesignated account to my-eBanc's bank account 16 utilizing the ACHsystem, as indicated by transfer line 18. The customer is then creditedthe amount of the transfer, by reference to its customer identificationnumber, in the customer credit database 28 (see FIG. 2). Subsequently,the customer can instruct my-eBanc to transfer funds from the customer'saccount to my-eBanc's bank account 16 utilizing the ACH system, eitherthrough the agent 12 or through the my-eBanc web site. The customer willdo this whenever additional funds are required to cover its on-linetransactions. The customer can also request my-eBanc to return funds atany time to the customer bank account which my-eBanc will do through thePayment Distribution System of the ACH.

Similarly, participating vendors are required to register for the systemas follows. Again, the vendor registration is preferably done through apersonal agent 12, but it can also be done through the my-eBanc web site20 or via a 1-800 telephone number, for example. The vendor provides thevendor's bank account information for the purpose of receiving depositsthrough the ACH into the vendor's bank account 30, as well as an e-mailaddress. The vendor also provides an Internet web site 22 at which thecustomer 12 can view and select for purchase digital or physical goodsor services. However the invention can also be utilized to pay for goodsor services delivered at a physical location, or over the telephone orother communication system. Where a vendor web site is the location forpurchase of goods or services, the vendor is provided with softwarewhich will interface with the my-eBanc web site.

To carry out a purchase of goods or services over the Internet or otherglobal computer network 40 using the system of the present invention,the customer accesses the Internet web site 22 of the my-eBancregistered vendor and orders the desired goods or services. Uponselecting “my-eBanc” as the method of payment, the my-eBanc softwarecalls up a my-eBanc web page to the customer and invites the customer toenter its username and password, or just its username where the customeridentification has been stored in a cookie, and clicks on a button toauthorize the transaction. Using the software provided by my-eBanc, thevendor's site then communicates with the my-eBanc web site server 46 andprovides the amount of the purchase and the vendor identificationnumber. The my-eBanc server 48 then checks the identity of the customer,the value of the transaction, and confirms in database 28 that adequatefunds are available to the customer's credit in the my-eBanc account 16.The my-eBanc server 46 then sends electronic instructions to the vendoreither confirming that the transaction can proceed or advising that thetransaction cannot proceed. If the funds are available, my-eBanc issuesa Payment Distribution System instruction to transfer the amount of thetransaction from the my-eBanc account to the vendor's bank account 30,and the vendor downloads the electronic goods to the customer, or shipsthe physical goods. The Payment Distribution System instructions areissued over secure communication lines, whether telephone or web-based,to the ACH, and the financial institution processes the transactionovernight, causing the settlement of funds 32 to be made. My-eBanc thensends a confirming e-mail to the vendor and customer confirming thetransfer of funds and records a debit in that amount against thecustomer's credit in database 28 (see FIG. 2).

Cross-border transactions where the currency of the vendor differs fromthe currency of the customer's account can also be conducted. Themy-eBanc web site 46 checks the currency of the vendor's destination forpayment, checks the current conversion rate from the customer's currencyto the vendor's currency, and determines the equivalent amount to becharged to the customer account for the transaction. If sufficient fundsare in the my-eBanc account to the customer's credit, my-eBanc instructsthe ACH to withdraw the funds in the calculated amount from the my-eBancaccount and to transfer the appropriate amount of foreign currency tothe vendor account.

With reference to FIG. 2, the my-eBanc web site 20, for example at theURL www.my-ebanc.com, consists of a web server 42, comprising web server46 accessible to the Internet 40. Customers 10 and vendors 50 haveaccess to the Internet network 40 via remote client terminals usingavailable Internet browser software. Web server 42 also includes asecure server 48 including account information databases such ascustomer credit database 28, and which is protected from the Internetaccess by firewall 49 but can communicate with server as well asAutomated Clearing House 60, which in turn communicates with financialinstitutions 16, 30 by secure communication lines 62. Firewall 49reduces the possibility that hackers can access or alter accountinformation.

Physical Purchases

According to a second variant of the invention, a customer can use thesystem of the invention to pay for goods or services at a physicallocation through a web-accessible terminal 50 having access to theInternet, either a vendor's terminal or a customer's wireless device.The customer enters its username and password confidentially onto themy-eBanc web site and the vendor transmits the transaction through themy-eBanc web site as noted above. The vendor provides the amount of thetransaction. The vendor identification can be entered manually orautomatically from a “cookie” on a vendor's terminal 50.

The method of ensuring that an account number in fact corresponds to theaccount owned by the individual purporting to own the account, asdescribed above, also has application to other systems such as creditcard charge systems where it is desirable to pre-confirm the validity ofthe account number. In many situations, both online and offline, acustomer will authorize a regular payment to be billed to a credit card.The validity of the credit card account can be verified in a one-timemethod as was described above. When the customer submits the cardnumber, the customer can first be requested to re-enter or confirm it.The credit card system manager then generates the random confirmationcode (RCC) consisting of a string of alpha-numeric characters, part ofwhich identifies the source of the string and part of which is randomlygenerated. The RCC is stored in a database along with the othercustomer-related information. The credit card manager then makes anominal credit, say $0.15, to the customer's account corresponding tothe account number, using the RCC as the transaction description orreference. Therefore on the customer's account statement the RCC willappear in the Transaction Description column next to the Amount(CR=credit) column showing the $0.15 credit. The customer is then sentan e-mail instructing the customer to view its account statement, whichis frequently accessible on-line to the customer, to obtain the RCCcorresponding to the $0.15 credit and enter it in the credit manager'sweb site. For example the customer is instructed as follows:

1. Get the 15-character alphanumeric code starting with XXX from youraccount statement that corresponds to a $0.15 credit

2. Go to the following web link www.visa.com.

3. Enter your user name.

4. Enter your password.

5. Enter the 15-character code.

The code entered by the customer is then compared to the code stored indatabase 28 for the customer and, if identical, the customer'stransaction is approved. If the codes are different, the customer isasked to re-enter it and the codes are compared again. This process isrepeated a limited number of times. If the customer does not achieve amatch, then the session is terminated and the customer is instructed tocommence the process again by re-submitting another card number, and theforegoing process is repeated. This method will be less useful forsingle merchant transactions, but is particularly useful where a regularcharge is desired to be made to a credit card.

As will be apparent to those skilled in the art in the light of theforegoing disclosure, many alterations and modifications are possible inthe practice of this invention without departing from the spirit orscope thereof. Accordingly, the scope of the invention is to beconstrued in accordance with the substance defined by the followingclaims.

What is claimed is:
 1. A method of securely transmitting sensitivefinancial transaction information over telephone lines or the Internetby utilizing the security of the Automated Clearing House Network whenconducting online purchases of goods or services by a customer from oneor more participating vendors over a computer network using a systemmanager, said customer having a customer bank account at a financialinstitution and said one or more participating vendors each having avendor bank account at a financial institution, said customer and vendorbank accounts being accessible through the Automated Clearing HouseNetwork, said computer network having a web server, and a secure systemmanager server coupled to a telecommunication device which is eithertelephone or internet-based for communicating over a securecommunication channel, said secure system manager server beingprogrammed for maintaining an originator account to receive electronictransfer of funds and generating Automated Clearing House Network datafiles for transmission to the Automated Clearing House to transfer fundselectronically; said secure system manager server having a centralprocessing unit, a memory, and a non-transitory computer-readable mediumwith programmed instructions stored thereon, that when executed by aprocessor, performs the steps comprising: i) receiving customeridentification and payment instructions in respect of goods or servicesfor purchase by a customer along with vendor identifications from aparticipating vendor via the web server; ii) storing the vendoridentification instructions in a first memory location; iii) storing thepayment instructions in a second memory location; iv) generating anelectronic file from said stored data to form an Automated ClearingHouse data file having the Automated Clearing House file formatspecifications for communicating Payment Distribution Systeminstructions; v) instructions are issued, activating an application,activating the telecommunications device which is either telephone orinternet-based by receiving instructions from the processor whichexecutes programmed instructions stored on the non-transitorycomputer-readable medium to instruct the telecommunications device, whentelephone based, to open said secure communication channel and dial areceiving telephone party address or when the device is internet-basedby issuing instructions to open an online session to generate a PaymentDistribution System instruction for communicating over said securecommunication channel with a receiving internet party address; vi)transmitting said Payment Distribution System instruction to theAutomated Clearing House Network via said telecommunication device whichis either telephone or internet-based over said secure communicationchannel; vii) receiving via said telecommunication device which iseither telephone or internet-based over said secure communicationchannel from the Automated Clearing House Network an indication that theAutomated Clearing House data file was transmitted and receivedsuccessfully; said method comprising: a) said system manager maintainingsaid originator account for said system manager to receive electronictransfer of funds, said originator account being accessible for transferof funds electronically over said secure communication channel, by saidtelecommunication device which is either telephone or Internet-basedover the Automated Clearing House Network; b) said system managermaintaining an account representing the balance of funds held to saidcustomer's credit in said originator account; c) said system managerreceiving from said customer an authorization to draw funds from saidcustomer bank account; d) said system manager receiving bank accountinformation identifying said participating vendors' bank accounts; e)said system manager receiving via the Internet a charge amount for aproposed purchase by said customer from a first participating vendor andidentification of said customer and said first vendor; f) said systemmanager, either before or after step e) generating an electronic file toform an Automated Clearing House data file and communicating saidAutomated Clearing House data file thereby electronically transferringsufficient funds over said secure communication channel, by saidtelecommunication device to the Automated Clearing House Network forsaid purchase into said originator account to said customer's credit; g)if said charge amount is in a currency different from the currency ofsaid funds to said customer's credit in said originator accountconverting said charge amount to said customer's credit in saidoriginator account to the currency of said funds to said customer'scredit in said originator account; h) said system manager confirming theavailability of sufficient funds to said customer's credit in saidoriginator account for said charge amount and communicating via theInternet the results of said confirmation to said first vendor toindicate whether to proceed with said purchase; i) if sufficient fundsto said customer's credit are available in said originator account forsaid charge amount, electronically transferring the amount of saidcharge amount to said first vendor; and j) said system managerconfirming via the Internet to the customer and to said first vendor thetransfer of said charge amount to said first vendor.
 2. The method ofclaim 1 wherein said charge amount is transferred to said first vendor'sbank account through the Automated Clearing House Network.
 3. The methodof claim 1 wherein said originator account is a bank account at afinancial institution.
 4. The method of claim 1 wherein said funds aretransferred to said customer's credit into said system manageroriginator account by obtaining a customer pre-authorized debitauthorization in favor of said system manager.
 5. The method of claim 1further comprising providing a system manager web site accessible tocustomers on the Internet via a plurality of client terminals, saidInternet accessible web site receiving said communication of saidproposed charge amount, vendor identification and said customeridentification.
 6. The method of claim 5 further comprising a secureserver communicating with said Internet accessible server formaintaining said account representing the balance of funds held to saidcustomer's credit in said originator account.
 7. The method of claim 1comprising the further step of confirming a customer bank account numberby said system manager making a deposit to said customer bank accountcorresponding to said customer and having said customer communicateinformation concerning said deposit to said system manager.
 8. Themethod of claim 7 wherein the system manager assigns a reference code tothe customer, stores said reference code, makes a deposit to thecustomer bank account corresponding to said customer along with saidreference code and instructs said customer to obtain said reference codefrom said customer's bank statement relating to said customer bankaccount for comparison to said stored reference code.
 9. The method ofclaim 1 wherein said customer identification is stored by said systemmanager in association with a unique identifier provided by saidcustomer upon registration of said customer with said system manager.10. The method of claim 9 wherein said unique identifier is provided bysaid customer for each said purchase.
 11. The method of claim 10 whereinsaid customer communicates said purchase to said system manager througha communication device and said unique identifier is provided by saidcustomer for each said purchase either manually or automatically by saidcustomer's communication device.
 12. The method of claim 1 wherein saidsystem manger is provided vendor bank account information for each saidparticipating vendor's bank account at the time of registration of eachsaid participating vendor with said system manager.
 13. The method ofclaim 5 wherein said customer accesses said system manager websitethrough a participating vendor's website.
 14. The method of claim 5wherein said customer accesses said system manager website from awireless device or a vendor's terminal.
 15. A computer implementedsystem for securely transmitting sensitive financial transactioninformation over the Internet by utilizing the security of the AutomatedClearing House Network when conducting online purchases of goods orservices by a customer from one or more participating vendors over theInternet using a system manager, said customer having a customer bankaccount at a financial institution and said participating vendors eachhaving a vendor bank account at a financial institution, said systemmanger having an originator bank account for said system manager toreceive electronic transfer of funds, said originator account beingaccessible on a computer programmed to transfer funds electronicallyover a secure communication channel, by a telecommunication device whichis either telephone or Internet-based to the Automated Clearing HouseNetwork, said system manager, customer and vendor bank accounts beingaccessible through the Automated Clearing House Network, said systemcomprising: a) a system web server accessible to customer and vendorterminals over the Internet via a plurality of said client terminals,said web server comprising computer software which when executedmaintains an interactive system manager web site to receivecommunications of proposed charge amounts in association with a customeridentification from said customer and vendor identification from saidvendor; b) a secure system server communicating with said system webserver, said secure system server comprising a central processing unit,a memory, and a non-transitory computer-readable medium with programmedinstructions stored thereon, that when executed by a processor: i)communicates over the Internet with a plurality of bank serversaccessible to the Internet; ii) maintains customer accounts representinga balance of funds held to said customer's credit in a said originatoraccount; iii) receives customer identification and payment instructionsin respect of goods or services for purchase by a customer along withvendor identifications from a participating vendor via the web server;iv) stores the vendor identification instructions in a first memorylocation; v) stores the payment instructions in a second memorylocation; vi) generates an electronic file from said stored data to forman Automated Clearing House data file having the Automated ClearingHouse file format specifications for communicating Payment. DistributionSystem instructions; vii) activates an application, activating thetelecommunications device which is either telephone or internet-based byreceiving instructions from the processor which executes programmedinstructions stored on the non-transitory computer-readable medium toinstruct the telecommunications device, when telephone based, to opensaid secure communication channel and dial a receiving telephone partyaddress or when the device is internet-based by issuing instructions toopen an online session to generate a Payment Distribution Systeminstruction for communicating over said secure communication channelwith a receiving internet party address; viii) transmits the saidPayment Distribution System instruction to the Automated Clearing HouseNetwork via said telecommunication device which is either telephone orinternet-based over said secure communication channel; ix) receives viasaid telecommunication device which is either telephone orinternet-based over said secure communication channel from the AutomatedClearing House Network an indication that the Automated Clearing Housedata file was transmitted and received successfully; x) draws fundsthrough the Automated Clearing House Network over said securecommunication channel, by said telecommunication device which is eithertelephone or Internet-based to the Automated Clearing House system fromsaid customer bank account when said system manager has been provided bysaid customer an authorization to draw said funds from said customerhank account; xi) receives via the Internet a charge amount for aproposed purchase by said customer from a first participating vendor andidentification of said customer and said first vendor; xii) eitherbefore or after receiving a charge amount for a proposed purchase,transfers sufficient funds through the Automated Clearing House Networkover said secure communication channel, by said telecommunication deviceto the Automated Clearing House Network for said purchase into saidoriginator account to said customer's credit; xiii) if said chargeamount is in a currency different from the currency of said funds tosaid customer's credit in said originator account converts said chargeamount to said customer's credit in said originator account to thecurrency of said funds to said customer's credit in said originatoraccount; xiv) confirms the availability of funds in association withsaid customer identification for said charge amount and communicates viathe Internet the results of said confirmation to said first vendor toproceed with said purchase; xv) electronically transfers the amount ofsaid charge amount to said first vendor's bank account through theAutomated Clearing House Network over said secure communication channel,by said telecommunication device to the Automated Clearing HouseNetwork; xvi) confirms via the Internet to the customer and to saidfirst vendor the transfer of said charge amount to said vendor.
 16. Thesystem of claim 15 wherein said originator account is a bank account ata financial institution.
 17. The system of claim 15 wherein saidprogrammed instructions when executed confirm a customer bank accountnumber by making a deposit to the bank account corresponding to saidcustomer and receive a customer communication confirming said deposit.18. The system of claim 17 wherein the programmed instructions assign areference code to the customer, store said reference code, make adeposit to the account corresponding to said customer account numberalong with said reference code, receive from said customer a referencecode from said customer's bank statement and compare said receivedreference code to said stored reference code.
 19. The system of claim 15wherein said customer Identification is stored by said system manager inassociation with a unique identifier provided by said customer uponregistration of said customer with said system manager.
 20. The systemof claim 15 wherein said programmed instructions store vendor bankaccount information for said participating vendors bank accounts at thetime of registration of said participating vendors with said systemmanager.